Etsy’s post-IPO struggles may have just gotten much worse with the launch of Amazon Handmade.
Shares of Etsy Inc.
fell as much as 6.9% in Thursday trading after Amazon.com Inc.
launched the marketplace specifically targeted at handmade goods. One analyst says the marketplace will likely cause Etsy sellers frustrated by the site’s embrace of manufactured goods to move over to Amazon, which could upend Etsy’s growth.
“I expect shares to go down considerably, but there’s still a solid company there. It will just be a slow growing e-commerce provider,” said Gil Luria, an analyst at Wedbush Securities.
Etsy shares closed with a 4.3% decline at $13.57 Thursday. They had already fallen 9% in the past three months, compared with the S&P 500’s loss of 2% in that time.
Amazon is launching its site with more than 80,000 items. More than 600 of the handmade items will be eligible for Amazon Prime at the beginning, the company said.
Etsy sellers may choose to list on both Etsy and Amazon initially, a sentiment that was common in the Etsy forum, Luria noted. But eventually, he believes they’ll turn to Amazon out of anger at Etsy, and because Amazon already has a large customer base and offers Amazon Prime services that mean fulfillment in two days.
Etsy is confident that won’t be the case, however.
“We believe we are the best platform for creative entrepreneurs, empowering them to succeed on their own terms,” Etsy CEO Chad Dickerson said in an emailed statement. “Etsy has a decade of experience understanding the needs of artists and sellers and supporting them in ways that no other marketplace can.”
In September, Etsy angered sellers when it announced that it was creating a manufacturing marketplace, which expands its use of third-party manufacturers on what started as a site for handmade crafts. Anger from Etsy sellers about outside manufacturing may be why Amazon emphasized that the listed goods are “factory-free,” “genuinely handmade” and “must be made by hand.”
Tom Forte, an analyst at Brean Capital, also sees sellers listing on both, but doesn’t see them leaving Etsy. In fact, Forte said he feels Amazon’s services are not advantageous for Etsy sellers because they won’t be able to keep up with two-day shipping, and buyers may find similar manufactured goods at a lower price on the Amazon platform.
“While I always take Amazon as a competitive threat to any company that I cover, in the case of Etsy, I think the market has overreacted,” Forte said.
Forte added that he believes only a small population of Etsy sellers are angry about Etsy’s shift toward outside manufacturers, and that Etsy is bringing in the manufacturers in a responsible way.
Amazon and Etsy use different pricing models, with Amazon charging 12% per item sold and a monthly fee of $40 if the seller sells more than 40 items per month. Amazon is waiving the fee until August 2016. Etsy does not charge a monthly membership but charges 20 cents for listing an item and takes a 3.5% cut of the selling price, as well as various processing fees.
After seeing Amazon’s foray into this market, Luria said eBay
may seek to capitalize on the market opportunity and create its own craft marketplace.
“It’s probably a matter of time before eBay does the same thing,” Luria said.